2021 State and City Budgets in Turmoil

The coronavirus pandemic has had a resounding impact on the financial positions of states and cities. In a recent article from Governing, author Alan Greenblatt examines the current financial situation.

Many state and city governments are currently faced with the daunting task of establishing 2021 budgets, as most fiscal years turn mid-summer. Greenblatt describes the long list of unknowns that make government budgeting—already a complex and difficult task—incredibly more difficult this year. Items in question include:

  • If and when will legislators in Washington provide further aid for state and local governments?
  • How much lower will quarterly tax payments be in 2020, and what impact will delayed payment deadlines have on budgeting?
  • Will the economy recover or is a further downturn in store?
  • Will unemployment continue to be high or will jobs return?
  • Will the federal government renew/extend the unemployment benefits established by the CARES Act?

Governments are taking a variety of approaches to the current situation. Generally, they are employing a combination of layoffs and/or furloughs, delays or cancelations of capital projects and spending cuts to get by in the short term. As they develop 2021 budgets, many are choosing to retain spending levels with the hopes that federal aid will be passed. However, if no Congressional aid package comes through, new budgets include contingencies for spending cuts.

For further details, click here to read the article in full at Governing.